Global ePayment firms make a wishlist for RBI

Visa and MasterCard, two of the largest card companies, applauded the RBI’s move to open up the retail payment sector to more entities.Pratik Bhakta | ET Tech | April 04, 2019, 05:10 IST

Creating a level playing field for the entry of retail payment networks and encouraging the formation of national bulk payment networks like RTGS (real time gross settlement) are among the handful of suggestions that global digital payment companies have made to the Reserve Bank of India.

The RBI had invited suggestions on the authorisation of new retail payment networks on January 21, seeking to minimise the concentration risk in retail payment systems from a financial stability perspective and foster innovation and competition.

Visa and MasterCard, two of the largest card companies, applauded the RBI’s move to open up the retail payment sector to more entities.

“Consider encouraging new players to participate in and promote pan-India payment platforms, such as real time payments (RTPs) and bulk and repetitive payments, to foster innovation and competition,” Visa said in a note shared with the RBI. “The criteria for licensing should be based on principles that allow entry in retail payment systems in an open and competitive manner to the entities having proven robust capabilities.”

MasterCard said in its response that it was looking at the initiative as an opportunity for new companies to enter the space and bring in innovation.

The RBI initially managed all forms of retail digital payments and slowly handed over multiple functions to the National Payments Corporation of India, which runs systems such as Unified Payments Interface, Immediate Payment Service and National Automated Clearing House. NPCI is a payments and settlements company promoted by banks.

“This will also ensure no single payment system has an undue advantage over others – any imbalance created by regulatory arbitrage could lead to increasing systemic risk,” said Visa. Also, there is a need to get companies with proven international financial standards for anti-money laundering and know-your customer requirements.

The industry is also looking at a detailed technical eligibility criteria and hoping that the RBI will put forward proper net worth thresholds so that a platform’s stability is not compromised.

Visa cautioned that the RBI needs to strike a balance between monopolisation of platforms offering retail digital payments on the one side and allowing a ‘multitude’ of players on the other, since it will require very serious players to be in this business.

“With the RBI opening retail payment networks for other participants, what was dominated by NPCI will now allow other players to come in as well,” a senior banker said on condition of anonymity. “The regulator has thought about it from the angle that concentration risk in NPCI has grown manifold and there is a need for other UPI-like platforms to emerge.”

Global payment giants can bring in their experience and push up the level of security and stability in the entire ecosystem. There were 800 million UPI transactions processed in March, according to data shared by NPCI.

“This is just the tip of the iceberg. Once adoption of digital payments goes beyond the top 100 million or so, there will be huge stress on a single platform. Therefore multiple platforms will help dissipate the concentration risks,” the banker said.